Paring Port-Terminal Costs for Competitive Logistics to PROMOTE Trade

The whole chain of multimodal transportation that caters to imports-exports needs to be efficient and cost-effective to promote trade to serve the populace, as a responsibility of all involved. Tenets of democratic economics dictate that the onus is on the electors –being impacted citizen user consumers- through the elected. What are we who are in the know, especially shipping professionals up to, to serve such a utilitarian beneficial cause?

For one, one has to stand aside from being an employee or employer, per force driven to work for the balance sheet and margins therein. In pure competitive situations, it works well, when service providers -right from manufacturers to consumers, etc tend to take this into account, by product differentiation and the like for market share. Nonetheless, lack of such focused efforts have compelled insertion of Corporate Social Responsibility (CSR) in the Companies Act, to serve not only the share and stakeholders.

However in oligopolic or monopolist situations, the scenarios change such that `pass on costs’ become an adage as appendix to drive up profitability, as a percentage of gross revenues to please accountants (themselves) and the chain of `rent seekers’, governments and administrators included, involved in issuing permissions, licenses, partnerships under public-private combinations, leasing, facilitating trouble free, etc.

As generally the public at large are ignorant about costing mechanisms, transfer pricing and other derived fundamentals of LLC Land Labour and capital, IT included of late, they cannot be expected to monitor, understand and seek realistic redressals. Herein lie the duties, responsibilities and commitment of the knowledgeable and aware professionals. It is a moral clarion honour call to do what is right and fair, even when lining pockets, as employees are expected to manage and contribute to margins any which way.

The sensible questions that arise are: What is action versus benefit; like willingness to pay fine for incorrect parking when one is in a hurry or for poor disposal of garbage when one is not inclined to do it properly. Stretching it a bit further, would one resort to or is expected to pursue corruption and the like -within Company Policies or SOPs, to avoid delays to hasten, or deter possible obstacles that could impede deadlines? Don’t they appear as crusading problem solving efforts in good faith? That’s the dilemma!

As senior marine professionals ashore, who have seen it all -here and there worldwide, and aware of (Anti-) Bribery Act that stretches across borders, shouldn’t we do our best for one and all, including ourselves as user consumer citizens? Hence the call against high port-terminal costs, camouflaged one way or the other, and quite obvious under `vessel related costs -VRC’, where the ‘92 $-Rs rate is used on gross tonnage, not even on NT, that is realistically related to commercial earning capacity of ships.

Please do understand that it applies to all cargoes and not just box trades. As India is a huge importer of energies: Coal, Crude oil, Gas, etc., that eventually trickles down to all including the common man and others, its impact on our domestic, employment/business, and other activity budgets are considerable. The containerised trade of course affects a host of products, both import and exports.

With humungous population and improving affordability, our imports are being driven up and have to be balanced with exports. Government is focused on logistics costs and its trimming to improve competitiveness of our products to enhance exports. The trade, be it importers and exporters: buyer, seller, intermediaries, vessel operators, etc, are all at the mercy of such highhanded lopsided costings imposed on us.

Trade itself has no choice, as we have seen with onion and tomato prices during recent rain impacted zooms and crashes that followed. Locational-situational competitiveness and pricing is what it is driven by and margins to stay afloat. Exploiting & milking them to make up for `grandfathers’ deficit faults’ is senseless. Incidentally, IMO -UN’s rule maker for shipping, gives concessions with `grandfather clause’ in new Convention rules to accommodate the aging during changing over. A lesson to be learned from, isn’t it?

Ports, terminals and executives, managers and professionals in them have a view that it is all incidental and so beyond them to institute any corrective measures. The carried forward liabilities of ports: poor investments, recurrent high capital costs (inflated, for whatever reasons), Labour settlement -automation, downsizing, etc- deals have become a heavy burden, being passed on through whatever means possible for recoveries.

Perhaps, it is timeous to treat such deficits as ‘bad loans’ and settle for once and all as banks are writing off ‘bad loans’ or selling off to asset reconstruction companies: ARCs.

It is urgent that such drastic measures are resorted to with alacrity, to control inflation dragging down values, especially on the energy front -due to imports- passed on to citizens.

Benefits that will accrue on such corrective measures will be enormous, apart from just taming inflation: trickle down, multiplier, growth rate that itself multiplies, increased competitive trades and endless such likes.

Whatsoever the causes of inefficiencies and trade-affecting malaises, they need be cured as if it is an ICU situation. May those in power and those able to guide please take note.

Marex Media

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The Author – Capt Sury Pullat (photo and details already with you)